Reviewed by Gotrade Internal Analyst
Jakarta, Gotrade News - The US Justice Department just launched a criminal investigation targeting Fed Chair Jerome Powell. This move is widely seen as a direct hit to the Fed’s legendary independence.
Key Takeaways
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The DOJ probe threatens the neutral status of US monetary policy.
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Markets reacted with a slight dip in stocks and the US dollar.
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Legal uncertainty might derail the highly anticipated rate cuts this year.
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Former Fed Chair Janet Yellen called the situation extremely chilling for the financial system. She warned that such moves could destroy the global credibility of US monetary policy.
Market Impact and Borrowing Costs
Based on a report from Yahoo Finance, stock markets and the dollar showed a slight decline. Investors are now worried about the future direction of the US economy.
Wilmer Stith from Wilmington Trust warned that bond yields might spike soon. This could lead to higher mortgage rates and hurt everyday purchasing power.
The White House claimed President Trump did not personally order this specific investigation. However, they have been very vocal about Powell being bad at his job.
Political Drama and Monetary Direction
Republican Senator Thom Tillis threatened to block all new Fed nominees until this ends. He wants the investigation resolved quickly to restore some market stability.
Analyst Krishna Guha believes this legal pressure might actually unite the Federal Reserve internally. The committee members will likely double down on their support for Powell.
Powell himself noted that these subpoenas are just a way to pressure interest rate decisions. He remains committed to keeping politics out of the Fed's room.
A politically controlled central bank usually leads to much higher long-term inflation. This chaos makes the prospect of fast rate cuts look very unlikely now.
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The current atmosphere of intimidation is alarming for the future of the American economy. These developments essentially promise the worst of all worlds for investors and the market.
Reference:
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Yahoo Finance, Former officials say DOJ probe threatens Fed independence, has 'no place in the United States'. Accessed on January 13, 2026
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AP News, DOJ investigation of Fed Chair Powell sparks backlash, support for Fed independence. Accessed on January 13, 2026
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Featured Image: Shutterstock
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